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8.1 Deal Structure

Based on the detailed financial analysis presented in Appendix 9.3 and 9.4, AdGrove.com is seeking $2 million in equity capital. In return for this investment, the investor will receive 11% of the outstanding common shares of AdGrove.com. The capital raised in this first round of equity financing will be used as follows:

First round Financing$2,000,000
Development Cost$1,000,000
Marketing & Advertising$500,000
Salary Expense$200,000
Office space leasing and other expense$300,000

AdGrove.com also intends to raise additional funds through 2nd and 3rd rounds of equity financing as follows:

October 2000 
Second Round Financing$4,000,000
By end of 2nd quarter 2001 
Third Round of Financing$4,250,000

The capital raised through these two rounds will be used to provide the working capital requirements. The largest part of these will be the advertising and marketing expenses. The initial investors will be given the first option to take part in these subsequent rounds of financing.

8.2 Investor Return

AdGrove.com will provide its investors a return on investment of 70%. The following table illustrates the calculation of the investor's returns:

Investment Opportunity
Investment required$2,000,000
Equity Offered11%
Industry Revenue Multiple20
Year 5 Revenue$26,900,000
Terminal Value in 5 years with the liquidity discount of 50%$269,000,000
Value of investment in Year 5$28,397,140
Return on Investment70%

8.3 Risk Analysis

Although AdGrove.com represents a great investment opportunity, there are inherent risks in the development of this online product, including:

8.3 Financial Review

AdGrove.com's financial projections indicate the following: (See Appendix 9.4 - Financial Exhibits)

AdGrove.com Income/Expense Projections

8.5 Exit Strategy

There are two primary means of an exit strategy for AdGrove.com's investors:
Table of ContentsAppendices
1. Executive Summary
2. Company Overview
3. Products and Services
4. Market Analysis
5. Marketing Plan
6. Operations Plan
7. Management
8. Financial Summary
Management Team Resumes
Small Business Internet Use
Revenue Model and Assumptions
Pro Forma Financial Statements
Strategic Alliance Proposal
Most Wired Cities in America
Market Research
Sample Questionnaire
All information herein is confidential and belongs to AdGrove.com, Inc.